Seventy Years of Dutch Regional Unemployment from a Spatiotemporal Perspective

Abstract. This paper applies the Bai-Perron method to identify longer-run structural breaks in Canadian regional unemployment rate series in order to estimate natural rates of unemployment for Canada and its regions. The longest samples (Canada, Quebec, Ontario, British Columbia, the Maritimes, and the Prairie region) span the 1946-2011 period while the shortest samples, covering smaller provinces, are for 1966-2011. In all cases the technique reveals significant breaks. On the longer series a jump upward of 1.6%-3.2% is found in the mid-1950s. A second, and larger, increase occurs in the mid-1970s in all but the two western-most provinces and the Prairie region. Further increases are seen in the early 1980s in all provinces west of Ontario as well as in the Maritime region and Nova Scotia. Declines in natural rate estimates are found for several provinces and Canada as a whole in the mid-to-late 1990s.1. IntroductionCanadian regional unemployment rates varied considerably over the period 1946-2011. Some of the variation, indeed the sharpest changes, are undoubtedly due to the business cycle. However, much of it may be accounted for by changes in the level of longer-run equilibrium unemployment rates around which the actual unemployment rate fluctuates; in other words, it is accounted for by changes in the natural rate of unemployment or NAIRU.1 These long-run natural rates are of some interest as indicators of the efficiency of individual regional labor markets and as determinants of regional wellbeing. The complex interplay between these regional NAIRUs and interregional migration is also of much interest. The level of the long-run regional unemployment rate may help determine long-run interregional migration patterns or the business locations of firms. Conversely, these same long-run unemployment rates will in part be determined by interregional labour mobility and its long-run determinants.This paper applies the Bai-Perron method to identify longer-run structural breaks in Canadian regional unemployment rate series in order to estimate natural rates of unemployment for Canada and its regions. The method is described after discussions of alternative approaches and data.2. Measuring the natural rate: Alternative approachesOne branch of the empirical natural rate literature hearkens back to Friedman's (1968) view of a natural rate of unemployment determined by various labor market frictions or imperfections. This imperfections approach estimates unemployment rate equations with proxies for the imperfections and a cyclical measure as control variables. Nickell, Nunziata, and Ochel (2005) is a recent example that generates estimates for Canada as a whole and other OECD countries. Canadian examples which use this approach to generate regional natural rate estimates include Riddell (1980), Miller (1987), Burns (1990), and Johnson and Kneebone (1991). Note that regional context factors that discourage interregional labor mobility will raise regional natural rates. See Cebula and Alexander (2006) for a recent study of the determinants of interregional mobility and Deller (2009) for an examination of regional equilibrium unemployment rates using a wage curve model.An alternative approach infers the value of the natural rate or NAIRU from behavior of a Phillips curve relationship. Examples of this approach include Gordon (1997), Ball and Mankiw (2002), and Ball (2009). These studies use a Hodrick-Prescott filter to separate the effect of the Phillips curve error term from the NAIRU. Laubach (2001) adopts another common approach that starts with a Phillips Curve relationship and then uses a Kalman filter to infer behaviour of the unobserved NAIRU.2 Both the imperfections approach and the Ball-Mankiw Phillips Curve method give natural rate estimates that show considerable variability over time. Indeed, they often resemble the actual rate series with the shorter-term fluctuations smoothed out. …

An important issue in the analysis of regional unemployment is whether movements in regional unemployment rates reflect the impact of region-specific shocks or shocks affecting the entire economy. Previous studies have examined this problem by considering how the regional rates move in relation to the national unemployment rate. However, it has to be remembered that the national rate is merely a weighted average of the regional rates. In this paper we show that misleading correlation or regression results are likely to be generated by such models and that the problem can best be avoided by utilizing available information about the interactions between the regional unemployment rates directly rather than their relationship to the national rate. The theoretical arguments are illustrated with simulation experiments and as a practical example we consider the relationship between regional and national unemployment in Australia. Une question-clé quant à l'analyse du chômage régional c'est de savoir si, oui ou non, la variation du taux de chômage régional reflète l'impact des chocs spécifiques à une région ou bien des chocs qui touchent une économie dans son ensemble. Des études antérieures ont examinéce problème en considérant comment les taux de chômage régionaux varient par rapport au taux de chômage national. Il est à noter que le taux national ne constitue qu'une moyenne pondérée des taux régionaux. Cet article cherche à démontrer que de tels modèles risquent d'engendrer des corrélations ou des régressions trompeuses et que l'emploi des renseignements disponibles sur l'interaction directe des taux de chômage plutôt que leur rapport au taux national permet d'éviter ce problème. Les arguments théoriques sont illustrées à partir des simulations et, à titre d'étude de cas, on considère le rapport entre le chômage régional et le chômage national en Australie. Bei der Analyse regionaler Erwerbslosigkeit erhebt sich die wichtige Frage, ob Verschiebungen der Erwerbslosigkeit auf regionaler Ebene die Auswirkung regionalspezifischer oder die die Gesamtwirtschaft betreffenden Erschütterungen widerspiegeln. Frühere Studien haben dieses Problen untersucht, indem sie Vergleiche zwischen der Verschiebung der Raten auf Regionalebene im Verhältnis zur Erwerbslosigkeit auf Landesebene anstellten. Man muß jedoch bedenken, daß die Landesrate nur einen höher bewerteten Durchschnitt der Regionalraten darstellt. Die Autoren zeigen in diesem Aufsatz, daß solche Modelle durchaus irreführende Korrelationen oder Regressionsresultate ergeben können, und daß dies Problem am ehesten vermieden wird, wenn verfügbare Daten bezüglich den Wechselwirkungen zwischen regionalen Erwerbslosigkeitsraten direkt in Anwendung gebracht werden, statt ihre Beziehung zur Landesrate einzusetzen. Die theoretischen Argumente werden mit Simulationsexperimenten illustriert, und als praktisches Beispiel führen die Autoren die Beziehung zwischen Erwerbslosigkeit auf regionaler und auf Landesebene in Australien an.

natural rate is an abstraction; like faith, it is seen by its works. can only say if bank policy succeeds in stabilizing prices, bank rate must have been brought in line with natural rate, but if it does not, it must not have been. (1) THE CONVENTIONAL PARADIGM for conduct of monetary policy calls for monetary authority to attain its objectives of a low and stable rate of inflation and full employment by adjusting its short-term interest rate instrument--in United States, federal funds rate--in response to economic developments. In principle, when aggregate demand and employment fall short of economy's natural levels of output and employment, or when other deflationary concerns appear on horizon, central bank should ease monetary policy by bringing real interest rates below economy's natural rate of interest for some Conversely, central bank should respond to inflationary concerns by adjusting interest rates upward so as to bring real interest rates above natural rate. In this setting, natural rate of unemployment is unemployment rate consistent with stable inflation; natural rate of interest is real interest rate consistent with unemployment being at its natural rate, and therefore with stable inflation. (2) In carrying out this strategy in practice, policymaker would ideally have accurate, quantitative, contemporaneous readings of natural rate of interest and natural rate of unemployment. Under those circumstances, economic stabilization policy would be relatively straightforward. However, an important difficulty complicates policymaking in practice and may limit scope for stabilization policy is policymakers do not know values of these natural rates in real time, is, when they make policy decisions. Indeed, even in hindsight there is considerable uncertainty regarding natural rates of unemployment and interest, and ambiguity about how best to model and estimate natural rates. Milton Friedman, arguing against natural rate-based policies in his presidential address to American Economic Association, posited One problem is [the policymaker] cannot know what `natural' rate is. Unfortunately, we have as yet devised no method to estimate accurately and readily natural rate of either interest or unemployment. And `natural' rate will itself change from time to time. (3) Friedman's comments echo those made decades earlier by John H. Williams and by Gustav Cassel, who wrote of natural rate of interest: The bank cannot know at a certain moment what is equilibrium rate of interest of capital market. (4) Even earlier, Knut Wicksell stressed the natural rate is not fixed or unalterable in magnitude. (5) Recent research using modern statistical techniques to estimate natural rates of unemployment, output, and interest indicates this problem is no less relevant today than it was 35, 75, or 105 years ago. These measurement problems appear particularly acute in presence of structural change, when natural rates may vary unpredictably, subjecting estimates to increased uncertainty. Douglas Staiger, James Stock, and Mark Watson document estimates of a time-varying natural rate of unemployment are very imprecise. (6) Orphanides and Simon van Norden show estimates of related concept of natural rate of output (that is, potential output) are likewise plagued by imprecision. (7) Similarly, Thomas Laubach and John C. Williams document great degree of uncertainty regarding estimates of natural rate of interest. (8) These difficulties have led some observers to discount usefulness of natural rate estimates for policymaking. William Brainard and George Perry conclude that conventional estimates from a NAIRU [nonaccelerating-inflation rate of unemployment] model do not identify full employment range with a degree of accuracy is useful to policymaking. …

This paper conducts stationarity tests for levels and ratios of national and regional unemployment rates by race and ethnicity. Results indicate that both unemployment rates and ratios for the total population and for subgroups by race, ethnicity and region are stationary around changing means. The black/white unemployment ratio has increased on average and the Hispanic/white unemployment ratio has decreased on average. Results are compared across regions of the US.

Unemployment has been routinely used as a measure of the economic cycle. In addition, regional unemployment rates are characterized by, among other factors, their relation to the national unemployment rate. In this regard, the literature on regional sensitivity to the economic cycle has analyzed how fluctuations in the national unemployment rate affect the regions. In recent years, due to the great impact of past crises, the development of new econometric techniques and the possible arrival of new crises, the debate on how sensitive regions are to the economic cycle has reopened. In Spain, this debate is necessary since unemployment rates are very high and display a great deal of heterogeneity. We analyzed regional unemployment rates in Spain between 1978 and 2018 through a recently developed dynamic spatial econometric model with common factors and found that some regions are more sensitive than others to the economic cycle. The results seem to show that in Spain, the sensitivity to the economic cycle displays a geographical pattern where the most sensitive regions are those located on the Mediterranean coast. Specifically, we find that the sensitivity to the economic cycle of unemployment is not determined by the fact that regions have high or low unemployment; it seems that geographical location plays an important role. These results can be useful for the national and regional governments when they implement countercyclical policies.

State unemployment rates diverged dramatically in the 1980s. Differing unemployment rates across states are an important public policy concern because of equity concerns and the pure human consequences of higher unemployment. Moreover, at the national level, a greater dispersion in state and regional unemployment rates can increase the natural rate of unemployment and shift the Phillips curve out because of an inefficient allocation of the labor force [3; 38]. One possible cause for the divergence in unemployment rates is national industrial restructuring. U.S. industrial restructuring was suggested by Lilien [26] as a cause for the rise in the national unemployment rate. Moreover, national restructuring can have differential impacts across states because states can have dramatically different mixes of industries from each other. One of the difficulties of national restructuring from a regional perspective is that it is difficult to avoid. On the other hand, if regional differences in unemployment are due to state idiosyncratic causes, state and local public policy can potentially play a more active role. For example, the economic problems that plagued the Northeast and California during the early 1990s have been typically attributed to national downsizing in the defense industries. Conversely, economic problems in these states may have been driven by factors that are located within the state, such as the collapse of their real estate markets.

The relationship between diversity and unemployment has long been an important issue for regional scientists. This article applies quarterly data for four regions in Taiwan during the 1981–2004 period and the empirical results indicate that regional diversity can reduce the national unemployment rate, and this is solid support for the hypothesis of inter-regional migration. To further evaluate this, the interactions among regional unemployment rates are tested using the seemingly unrelated regression estimation approach, where the negative correlations of the regional residuals show that inter-regional migration is indeed an important common factor among regions. An isolated regional labour market with the highest unemployment rate in Taiwan re-confirms that inter-regional migration plays a critical role in lowering national unemployment. In sum, regional diversity can induce migration, which then reduces national unemployment.

Purpose - This study analyzed the determinants of local unemployment rate in Korea using panel data from 16 metropolitan cities and provinces from 2000 to 2018. Design/methodology/approach - We use a dynamic spatial panel model that considers characteristics of the regional unemployment rate such as the common factors effect, spatial dependence, and serial correlations. Findings - The local unemployment rate is affected by the past and present values of the national unemployment rate. And it is significantly affected by the past local unemployment rate and the past neighboring unemployment rate because spatial dependence and serial correlations are clearly present. In addition, when the industrial structure diversity and labor productivity were high, the regional unemployment rate decreased, and when the education level was high, the regional unemployment rate increased. Research implications or Originality - In order to reduce regional unemployment rate, it is necessary to plan and establish regional customized industrial structure policies under the stance of diversification rather than specializing the regional industrial structure and accompany improvement of the quality of education with the number of years of education. In addition, the redistribution of labor from low labor productivity sectors to high labor productivity sectors through technology development will help to reduce the local unemployment rate.

The Nru and the Evolution of Regional Disparities in Spanish Unemployment

Increasing Returns and Spatial Unemployment Disparities

Self-Reported Satisfaction and the Economic Crisis of 2007-10: Or How People in the UK and Germany Perceive a Severe Cyclical Downturn

Unemployment and GDP are widely used as proxies for a broader concept of well-being in the European Union, especially at regional level. This paper asks whether such an approach is reasonable. Using data from a range of sources, it examines the association between unemployment, GDP and a number of alternative well-being indicators in five domains – material welfare, education, health, productive activity and social participation. It finds that GDP per capita is not a good proxy for wider regional well-being within a country, but that the regional unemployment rate performs reasonably well. Pooling fifteen member states together, however, regional GDP is a better predictor of a region’s well-being than unemployment. This is because national GDP tells us more about how a country is doing overall than the national unemployment rate. These findings have implications for the European Council’s decision to treat variation in the regional unemployment rates as the sole indicator of regional inequality within Member States, and for the allocation of the Structural Funds.

BackgroundPrevious research shows that parental unemployment is associated with low life satisfaction in adolescents. It is unclear whether this translates to an association between national unemployment and adolescent life satisfaction, and whether such a contextual association is entirely explained by parental unemployment, or if it changes as a function thereof. For adults, associations have been shown between unemployment and mental health, including that national unemployment can affect mental health and life satisfaction of both the employed and the unemployed, but to different degrees. The aim of this paper is to analyse how national unemployment levels are related to adolescent life satisfaction, across countries as well as over time within a country, and to what extent and in what ways such an association depends on whether the individual’s own parents are unemployed or not.MethodsRepeated cross-sectional data on adolescents’ (aged 11, 13 and 15 years, n = 386,402) life satisfaction and parental unemployment were collected in the Health Behaviour in School-aged Children (HBSC) survey, in 27 countries and 74 country-years, across 2001/02, 2005/06 and 2009/10 survey cycles. We linked this data to national harmonised unemployment rates provided by OECD and tested their associations using multilevel linear regression, including interaction terms between national and parental unemployment.ResultsHigher national unemployment rates were related to lower adolescent life satisfaction, cross-sectionally between countries but not over time within countries. The verified association was significant for adolescents with and without unemployed parents, but stronger so in adolescents with unemployed fathers or both parents unemployed. Having an unemployed father, mother och both parents was in itself related to lower life satisfaction.ConclusionLiving in a country with higher national unemployment seems to be related to lower adolescent life satisfaction, whether parents are unemployed or not, although stronger among adolescents where the father or both parents are unemployed. However, variation in unemployment over the years did not show an association with adolescent life satisfaction.

In this paper we examine the nature of disparities in regional (state) unemployment rates in Australia over the period 1978-99 and their relationship to the national unemployment rate. Using co-integration analysis, we find that there is a negative relationship between the two implying that, as the national unemployment rate falls, micro and/or differentiated labour market policies need to bite harder (and affect proportionately more people) if equity in unemployment across regions is to be maintained. We also find that the trade-off between dispersion and unemployment has become steeper in the period following significant deregulation of the Australian economy in the early 1980s. It would appear likely that this reflects an increase in differences in the natural rate of unemployment between the regions since that time. Cet article cherche à examiner l'essentiel des écarts entre les taux de chômage régional en Australie (à savoir au niveau des états) de 1978 à 1999 et son rapport au taux de chômage moyen. A partir d'une analyse cointégrée, il s'avère que les deux variables ne sont pas en corrélation étroite, ce qui laisse supposer qu'il va falloir des politiques en faveur de l'emploi, soit microéconomiques, soit différenciées, qui se font plus sentir (et touchent proportionnellement plus de gens) au fur et à mesure que le taux de chômage baisse pour assurer la péréquation du chômage régional. Il s'avère aussi un compromis plus fort entre la dispersion et le chômage au cours des années qui suivent l'importante déréglementation de l'économie australienne dans les années 1980. Il est probable que les écarts entre les taux de chômage régional naturel se creusent àcette époque. Der vorliegende Aufsatz untersucht die Natur der Disparitäten der Erwerbslosigkeitsraten der einzelnen Staaten Australiens im Zeitraum 1978-1999 sowie deren Beziehung zur Erwerbslosigkeit Gesamtaustraliens. Mit Hilfe der Ko-integrationsanalyse wird festgestellt, daß die Beziehung zwischen den beiden negativ ist. Dies deutet darauf hin, daß bei Abnahme der gesamtstaatlichen Erwerbslosenrate mikro-und/oder unterschiedliche Arbeitsmarkttaktiken verschärft werden (und verhältnismäßig mehr Personen betreffen) müssen, wenn in den Regionen allgemeine Fairneß in Erwerbslosigkeit erhalten bleiben soll. Darüberhinaus wird festgestellt, daß die Einbußen, die bei Streuung oder Erwerbslosigkeit auftreten, sich in dem Zeitraum nach der Einführung beträchtlicher Wettbewerbsfreiheit in Australien zu Beginn der achtziger Jahre verschärft haben. Es ist wahrscheinlich, daß dies seitdem in einer Zunahme der Unterschiede der natürlichen Erwerbslosenrate zwischen den einzelnen Regionen reflektiert wird.

İktisat literatüründe işsizliğin uzun dönem eğilimlerini açıklayan iki önemli görüş bulunmaktadır. Bunlardan ilki “doğal oran hipotezi” diğeri ise “histeri hipotezi” olarak bilinmektedir. Doğal oran hipotezine göre uzun dönemde işsizlik, doğal oranına ulaşacak ve bu oran üzerinde enflasyon ile işsizlik arasındaki değiş-tokuş ilişkisi sona erecektir. Kısa dönemde ise söz konusu değiş tokuş ilişkisi geçerli olacaktır. Histeri hipotezi yaklaşımı ise şokların işgücü piyasasındaki katılıklar nedeniyle işsizlik düzeyi üzerinde kalıcı etkilere sahip olduğunu ileri sürmektedir. İktisadi bir şoktan sonra işsizlik oranı eski seviyesinin çok üzerinde bir patikaya oturacaktır. Bu görüşe göre uzun süre yüksek işsizlik yaşanması doğal işsizlik oranının eski seviyesine dönmesine engel olacaktır. Bu çalışmada OECD ve Türkiye ekonomisi için 1980-2016 yılları arasında işsizlik oranına karşılık gelen enflasyon oranları arasındaki doğrusal ilişkiden hareketle doğal işsizlik oranı ekonometrik olarak hesaplanmaya çalışılmıştır. Elde edilen katsayılar istatiksel olarak anlamlı ve iktisat teorisiyle uyumlu işaretlere sahiptir. Söz konusu dönemde Türkiye ekonomisi için doğal işsizlik oranı %9.14 seviyesinde hesaplanmıştır. OECD ülkeleri için ise İşsizlik oranı %1 puan artığında enflasyon oranı söz konusu dönem için ortalama olarak %0.9 puan azalmıştır. Doğal işsizlik oranı ise OECD ülkeleri için %6.12 olarak hesaplanmıştır. Bu sonuçlar aynı zamanda söz konusu ülkeler için enflasyon ile işsizlik arasındaki ödünleşmeyi gösteren Philips Eğrisi’ nin katsayılarını göstermektedir.